UNU-WIDER Partnership or Neo-colonialism?

will be discussed by scholars, researchers, and policy makers at a workshop on 5–6 September 2008 in Johannesburg, South Africa. The rise of the four large emerging economies (CIBS), their overall impacts and implications for Africa, and issues arising from South–South relationships will be addressed.

1. Is Africa as a whole gaining from increasing economic and political linkages with CIBS, and what are the new strategies for development?

China’s recent venture into Africa is attracting wide international attention and debate. The China–Africa relationship is primarily driven by commercial and economic factors, with aid as a key element in this partnership. Fresh research examines the emerging collaborative approach to foreign policy on the African continent, driven by state–business synergies. Africa has become a strategic focus for Chinese companies, chiefly in the extractive industries. The presence of Chinese private companies and the recent increases of official development assistance have enhanced the relief of Africa’s infrastructure bottlenecks, which should, in turn, help to increase the continent’s productive and trade capabilities. There are however many unknowns to this new-found partnership, mostly concerning aid policy, non-transparency issues relating to private loans, and overall expectations in terms of increasing general welfare and economic development.

2. What are the determinants of FDI?

Foreign direct investment (FDI) inflows tend to be higher in countries with better governance and institutions. FDI is affected by physical and financial infrastructure, as well as by human capital and institutional capabilities. Poor institutional and political regimes, a lack of physical infrastructure, financial constraints, and human capital limitations are the main obstacles for foreign firms in African countries. Natural resources-seeking financial flows have been the main component of FDI in Africa. This investment strategy has not contributed positively to the long-term diversification of production or sustainable development of African countries. What are the appropriate strategies to diversify the FDI portfolios? One promising direction is the augmentation of human capital, given the evidence that this attribute is a critical element in the attraction of FDI.

3. What spill-over effects do countries perceive from FDI? What lessons can African and other developing countries learn from successful emerging economies?

Fast-growing developing countries have emerged as an important source of investment. South–South FDI has increased from about US$15 billion in the mid-1990s to over US$50 billion in 2007. Southern multinational corporations, notably from China and increasingly India, have become providers of capital and technology to African and other developing economies. The trick is how can this provision contribute most effectively to enhance growth and development in Africa?

4. Is there an interface between private domestic and foreign investment?

FDI and domestic investment are essential for economic growth. However, FDI tends to displace private investment in a number of developing economies, including those in Sub-Saharan Africa. The challenge for developing countries is to devise an FDI strategy that can foster both economic growth and domestic investment, by contributing to the development of new technology or products to the host country.

5. How is the developing world responding and managing Asia’s growing demand for commodities, natural resources, and energy? How can the resource curse be avoided?

The process of structural transformation in CIBS has important implications for the use of natural resources. The current commodity boom, driven mostly by rapidly growing Asian economies, has led to both gains and potential pitfalls in commodity exporting countries. Although countries that export raw materials have observed significant improvements in their terms of trade, the higher demand driven by China and India has also contributed to accentuate volatility of both commodity prices and export earnings. This scenario poses further challenges to macroeconomic management and stability, a dimension that is also explored in the workshop.

During the workshop, about 20 papers will be presented. These papers will be available on the UNU-WIDER website as research papers and in due course a selection will be published in an edited collection. These publications will contribute to policy actions both at the national levels in Africa, CIBS, and other developing countries, as well as in the international policy arena.